Business Regulation and Economic Performance
Norman Loayza, Luis Serven
World Bank, 2010 - Business & Economics - 274 pages
The Schumpeterian process of 'creative destruction' is an essential ingredient of a dynamic economy. In many countries around the world, however, this process is weakened by pervasive regulation of product and factor markets. This book documents the regulatory obstacles faced by firms, particularly in developing countries, and assesses their implications for firm renewal and macroeconomic performance. Combining a variety of methodological approaches--analytical and empirical, micro and macroeconomic, single- and cross-country-- the book provides evidence that streamlining the regulatory framework would have a significant social pay-off, particularly in developing countries that are also burdened by weak governance. The book's chapters trace out analytically and empirically the links between microeconomic policies and distortions, on the one hand, and aggregate performance in terms of productivity, growth and volatility, on the other. The volume adds to a novel but increasingly influential literature that seeks to understand macroeconomic phenomena from a microeconomic perspective, and derive the relevant lessons for development policy. Such literature is still fairly scarce in the case of industrial countries, and virtually in its infancy for developing countries.
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Different Levels of Institutions Index 239
Product Market Regulation and Macroeconomic
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adjustment costs adjustment functions aggregate productivity Aghion allocative efficiency annex average bankruptcy barriers Caballero calculations capital chapter Chile coefficient Colombia competition component cross-country deregulation developing countries economic growth effect of product effect of regulation empirical employment endogeneity entry and exit Eslava estimated evidence firm dynamics firm turnover fiscal regulation Fraser Institute Galgau governance growth rate Haltiwanger Heritage Foundation higher impact of regulation increase index X turnover indices industry innovation institutions index instrumental variable interaction investment Koedijk labor productivity growth labor regulation Latin American Latin American countries Loayza macroeconomic performance macroeconomic volatility markup ment Nicoletti nomic OECD OECD countries output overall Oviedo P-value Paper percent period plants product market reform product market regulation productiv R-squared reallocation regression regulation index robust sample Scarpetta sector Serven shadow economy shortages significant simulated Source standard deviation tion trade turnover rates Uruguay values workers World Bank